Mercosur: Challenges and Opportunities for the Southern Common Market

Mercosur, or the Southern Common Market, is an economic and political bloc comprising Argentina, Brazil, Paraguay, and Uruguay. Created in 1991, the bloc was formed with the goal of creating a common market similar to the European Union and increasing business and investment opportunities for regional industries. However, in recent years, Mercosur has struggled to open to other markets and faced several challenges, including environmental concerns, European opposition, growing Chinese influence in Latin America, and unstable trade relations with the United States.

Mercosur’s Founding

  • Countries Argentina, Brazil, Paraguay, and Uruguay are the founding countries of Mercosur, and they are full members of the bloc. Venezuela joined as a full member in 2012, but it was suspended indefinitely in late 2016 for failing to comply with the bloc’s democratic principles.
  • In 2020, the founding countries had a combined gross domestic product (GDP) of roughly $1.9 trillion, making Mercosur one of the world’s largest economic blocs.

Associate Members

  • Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname are associate members of Mercosur. They receive tariff reductions when trading with the full members but do not enjoy full voting rights or free access to their markets. Bolivia was invited to join as a full member in 2012, but its accession has not yet received authorization from Brazil’s Congress.

Mercosur’s Creation

  • Mercosur was created in 1991 when Argentina, Brazil, Paraguay, and Uruguay signed the Treaty of Asuncion, an accord calling for the “free movement of goods, services, and factors of production between countries.”
  • The four countries agreed to eliminate customs duties, implement a common external tariff of 35 percent on certain imports from outside the bloc, and adopt a common trade policy toward outside countries and blocs. The charter members hoped to form a common market similar to that of the EU to increase business and investment opportunities for regional industries and encourage local development.

Mercosur’s Challenges

  • In recent years, Mercosur has struggled to open to other markets. The implementation of a landmark draft trade deal it signed with the European Union (EU) in 2019 has been stalled over environmental concerns and European opposition.
  • At the same time, China’s influence in Latin America continues to grow. Some experts have also questioned the bloc’s commitment to democracy. Additionally, it faces challenges including the COVID-19 pandemic, increasing fragmentation among member countries, and unstable trade relations with the United States.

Mercosur’s Functioning

  • The bloc’s highest decision-making body, the Common Market Council, provides a high-level forum for coordinating foreign and economic policy.

The group consists of the foreign and economy ministers of each member state, or their representatives. The Common Market Group, made up of senior officials from the member states, supports the council by preparing meetings and carrying out its decisions.

Written by IAS POINT

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